JOHN KEELLS HOLDINGS

Rs. 352

+113%
Rs. 53 On Volatility Upside Rs. 92

+81%

CAL Target Price March 2013

On Concept Value

Rs. 206

+25%
Rs. 165

On Fundamentals

FINALLY A BUY ON FUNDAMENTALS

8 February 2012 Refer p.55 for important disclaimers Purasisi Jinadasa CAL Research
1

Contents
I. II. III. IV. Summary: Finally a Buy on Fundamentals Approaching Terminal Velocity in Transportation Investor Pleasure from Leisure The Rest Incremental Contribution to EBIT
i.
ii. iii. iv.

Cold Foods to continue to strengthen segment earnings, while retail is flat-ish Property: intermittent inflows boost nonrecurring profits Finance: NTB sale a positive for shareholders Others to contribute to EBIT at a steady pace

V. Appendix 1 Financial Statements VI. Appendix 2 Present Value Calculations

2

I. SUMMARY: FINALLY A BUY ON FUNDAMENTALS

Price is back to attractive levels following postwar market

LKR
9,000 300.0 8,000 250.0 7,000 LKR

6,000

200.0

5,000

150.0
4,000

3,000

100.0

2,000 50.0 1,000

0 1/2/2009

0.0 1/2/2012

ASPI (LHS)

JKH (RHS)

*JKH share price is adjusted for subdivision

4

At CALs FY13E target price of Rs. 206, JKH would provide a 27% total return including dividends
YEAR END MARCH Revenue (Rs.mn)
EBIT (Rs.mn) Profit to Equity Holders (Rs.mn) Recurring Profit Recurring EPS Recurring EPS Growth (%) Recurring PER (x) Reported EPS Reported Growth (%) Reported PER (x) EV/EBIT (x)

FY11 60,500 11,425 8,245 5,983 7.1

FY12E 73,953 14,155 8,499 6,781 8.1 14.1

FY13E 77,463 16,497 7,609 7,610 9.0 11.1

FY14E 85,861 18,227 10,178 10,178 12.1 34.4

Recommendation

BUY
Price Target

Rs. 206
Market Price

Rs. 165
Date

33.7
9.8 24.5 13.3

22.2
11.3 15.3 15.8 9.2

22.8
10.2 (9.7) 20.2 9.6

18.3
13.3 30.4 16.7 9.6

8 February 2012
Issued Shares (mn): Market Cap (USDmn): 12 mth H/L (Rs.): Avg Daily T/O (USDmn): 842 1,277 226/159 1.14

* EPS figures are adjusted for subdivision. Refer Appendix 1 for details
5

CALs target price of Rs. 206 is equal to JKHs end FY13 net present value
Leisure and Transport combine for 58% of sum-of-parts value
SEGMENT Transport Leisure Cold Foods & Retail (CF&R) Property Financial Services Other Total before Adjustments -Net Debt/Share +Present Value of Tax Shields Total CONTRIBUTION (RS.) 60 61 17 7 26 35 207 2 1 206
6

OVERALL PERCENTAGE 29% 29% 8% 3% 13% 17% 100%

Substantial concept value: JKH could secure a city casino JV worth c.Rs. 92/share in NPV terms
Plans exist for a JV City integrated casino, mall & hotel resort. Conversion probability is now higher with USD 800mn Sun City resort casino approved JKH would receive 8% of revs for management
Based on: USD 500mn expected investment 50,000 sq. ft of gaming 100,000 sq. ft of other space 5-star hotel 8% of revenues as JKHs share

Value of Opportunity Rs. 92/Share

Source: CAL Estimates and Company Reports

The combination of concept, liquidity & scarcity premia could drive price to 300
Rs. 352 Rs. 53 On Volatility Upside

+113%

Rs. 92 CAL Target Price March 2013 On Concept Value

+81%

Rs. 206

+25%
On Fundamentals Rs. 165
8

Cumulative Gains Possible by March 2013, based on Current Price of Rs. 165

JKH features a FY12-14E EPS Cagr of 22% vs. a FY13E PER of 23x
Leisure to Surpass Transport EBIT in FY13E
LKR Billions 20 18 16 14 12 10 8 6

Other Financial Services Property 3.94 3.81 2.94 5.97 2.80

2011

4.29

CF&R Transport Leisure

4 2 2012E

6.62

3.59

2013E

2014E

Source: CAL Estimates and Company Reports 9

II. APPROACHING TERMINAL VELOCITY IN TRANSPORTATION

10

Productivity and pricing are keys as full capacity looms

Ports offers consistently very high EBIT Margins due to low marginal cost of box handling, but unfortunately, without new concessions, SAGT has only 200k additional TEU handling capacity Post FY12E, Port profit improvements can only come from higher prices or cost control Although modest price increments may be feasible given regional comps substantial revenue gains can result from increases in moves per hour However, Port expansions are underway. 1st phase targets +2.4mn TEUs by 2014, but none will go to JKH +2.4mn TEU capacity can be filled with only c.20% of Singapores share to South Asia Two more terminals up for grabs: each will add a further 2.4mn TEUs to the port, and JKH could bid on either Bold expansion can add to JKHs profits For Transportation, higher volume is key to success as EBIT margins remain tight
11

Ports offer consistently very high EBIT margins

100%

FY11 Total Revenue: Rs. 13.4 bn

90% 80% 70%

Ports Revenue 27%

60% 50% 40% 30%

Transportation Revenue 73%

20%

10%
0% 2011 2012E 2013E 2014E

Source: CAL Estimates and Company Reports

Ports & Shipping

Transportation

EBIT Margins

12

due to low marginal cost of box handling, but

South Asia Gateway Terminals (SAGT) breaks-even at c.920k TEUs, making the 2mn TEUs handled in FY11 the Groups most important single revenue generator
LKR Billions

6 5 4 3 2 1 150,000 450,000 750,000 1,050,000 1,500,000 2,000,000

Twenty-foot Equivalents (TEUs)
Total Cost Revenue

47% Margin

920k TEUs

2.2mn TEUs

Source: CAL Estimates

13

unfortunately, without new concessions, SAGT has only 200k additional TEU handling capacity
In 2011, SAGT was at 91% utilization c.2mn Twenty-foot Equivalents (TEUs) In 2011, total Colombo port utilization was c.92% c.140,000
TEUs remaining

Current Utilization c.200,000 TEUs remaining Current usage at 4.16mn TEUs

Current utilization 2mn TEUs

JKH-SAGT Rest of Colombo Port
Source: CAL Estimates, SLPA and Company Reports

14

Post FY12E, Port profit improvements can only come from higher prices or cost controls
From operational efficiencies
LKR Billions

From price increments From remaining capacity

2010 2011 2012E 2013E 2014E Source: CAL Estimates 15

Although modest price increments may be feasible given regional comps

250

Regional Prices per TEU Move

200

Increasing price/move looks attractive, but may decrease the Colombo Ports regional competitive edge and ability to attract shippers currently using Singapore as a hub for South Asia to Colombo
Destination (Prices in USD) Freight Rate/TEU Fuel Surcharge/ TEU Price/ Move/ TEU Total

150
USD

100

Colombo to Calcutta Singapore to Calcutta Colombo to Singapore

430

30

30

490

50

500
1040 1690

80
30 80

106
30 106

686
1100 1876

Singapore to Colombo

Source: CAL Estimates and Industry Data 16

substantial revenue gains can result from increases in moves per hour
40

Port of Tanjung Pelepas (PTP: Malaysia): 32/hour Singapore (PSA): >35/hour

35.0%

30.0%
25.0% 20.0% 15.0% 10.0% 5.0%

35

30

Panamax crane average efficiency rate c.35 moves/hour

25

+11 moves/hour on all Panamax cranes = c.+Rs. 1,633mn to top-line

20

0.0%

15

10

Current JKH rate c.24 moves/hour

+1 move/hour on all Panamax cranes = c.+Rs. 148mn to topline

Moves/Hour

Additional Contribution to Revenue

Source: CAL Estimates and Industry Data

17

However, Port expansions are underway. 1st phase targets +2.4mn TEUs by 2014, but none will go to JKH

100% 90%

Additional 2.4mn TEUs

80% 70%

6.9mn TEUs

60% 50% 40% 30% 20% 10% 0%

JKH @ 49%

JKH Falls to 32%

2014 Expected Capacity

2011
Market Share

2014
Source: CAL Estimates and Industry Data

18

+2.4mn TEU capacity can be filled with only c.20% of Singapores share to South Asia
Additional regional growth is not factored into CALs calculations
Destination (Prices in USD) Total Cost/TEU

c.25.4mn TEUs destined for transshipment

Colombo to Calcutta
29.9mn TEUs in 2011 Singapore to Calcutta

490 686

12mn TEUs transshipped to South Asia

Singapore

Shippers can save about USD196/TEU by shipping to India via Colombo, therefore Port expansion is likely to see overall transshipment market share rise
Source: CAL Estimates and Industry Data 19

Two more Terminals up for grabs: each will add a further 2.4mn TEUs to the Port, and JKH could bid on either
Phase II expansion plans

Bidding yet to commence on East and West Terminals Bidding over, South Terminal under construction

SAGTs Current Location

Source: ADB Report Recommendation of the President to the Board of Directors 20

Colombo East Terminal: Likely to be fully-owned by Sri Lanka Ports Authority. However, this location is likely to enhance efficiencies for JKH if it wins the bid

Cross-traffic can improve efficiencies and may help feed smaller vessels harbored at SAGT from bigger vessels harbored across the pier

Lowers fuel costs Ability to rationalize container depot Lowers servicing time

21

Bold expansion can add to JKHs profits

Capacity increases Market share increases Throughput increases Cost per TEU decreases Pricing power increases
* Scenario hinges on if JKH can keep variable costs below that at SAGT

31%

30%
29% 28% 27% 26% 25% 24% 23%

JKH breakeven @ c.794,000 JKH breakeven @ c.913,000

ADDITIONAL TERMINAL (+29% IN VARIABLE COSTS)

ADDITIONAL TERMINAL (+10% IN VARIABLE COSTS)

% Increments to EBIT with a 30% stake in the New Terminal

Source: CAL Estimates

22

For Transportation, higher volume is key to success as EBIT margins remain tight
The transportation sector is a fragmented market. JKH operates as a third party logistics provider, freight forwarder and marine bunkering service provider as well as a GSA for airlines
Source of Goods Manufactured Locally JKH By Sea HAYLEYS Industry Logistics Co's National Distributors Local/Regional Distributors Destination of Goods Individual Households

Re-Export

By Air

AITKEN SPENCE

Businesses

EXPOLANKA Local Produce Government

Numerous Small Operators

Source: Company Reports

23

III. INVESTOR PLEASURE FROM LEISURE

24

Leisure will prosper as ongoing tourism surge leads to higher hotel occupancies and RevPARs
Increasing tourist arrivals and plateauing room capacity in Sri Lanka to benefit JKH Star class improvements to further drive revenue and profit growth Higher occupancy + better room rates = 13% revenue Cagr FY12-14E Further fall of LKR would have a positive impact on revenue: c.74% foreign occupancy Local tourism would be minimally impacted by a weaker LKR
25

Increasing tourist arrivals and plateauing room capacity in Sri Lanka to benefit JKH
Thousands 1,400 100% 90% 1,200 80% 1,000

70% 60% 50%

JKH occupancy levels to increase to 90% in 2014 from 69% in 2011

800

600

40%
30% 20%

Overall, Sri Lankas hotels should see 78% occupancy rates in 2014

400

200 10% 0 2008 2009 2010 2011 2012E 2013E 2014E 0%

Tourist Arrivals (LHS) JKH Occupancy Rates (RHS)

Sri Lanka Occupancy Rates (RHS) JKH Rooms Market Share LK (RHS)

JKH has almost 12% of total Lanka hotel room stock

Source: CAL Estimates and SLTDA

26

Star class improvements to further drive revenue and profit growth

USD 100% 90% 120 80% 70% 60% 50% 40% 30% 20% 20 10% 0% 60 140

100

80

c.12% of JKHs room inventory underwent refurbishment in 2011, resulting in a rating upgrade to 4-star for the beach front Chaaya marques

40

As a result, CAL expects JKHs average rates to jump from under USD 100 in 2011 to over USD 130 by 2013

2011

2012E

2013E

2014E

Occupancy Rate JKH 4-Star Hotels (LHS)

JKH Average Room Rate (RHS) Source: CAL Estimates 27

Higher occupancy + better room rates = 13% revenue Cagr FY12-14E

LKR Billions 25 90% 80% 20 70% 60% 15 50% 40% 10 30%

20%
10%

0 2010 2011 2012E 2013E 2014E

0%

Turnover (LHS)

JKH Occupancy Rates (RHS)

* Revenue includes all forms of income from all hotels

Source: CAL Estimates

28

Further fall of LKR would have a positive impact on revenue: c.74% foreign occupancy
A further LKR decline is not likely to impact foreign spend, due to fixed dollar budgets
LKR

Correlation = 0.97
120 10,000

100 8,000 80 6,000 60 4,000 40 2,000

20

1995

1999

2003

2007

2011

USD/LKR (LHS)

Tourist Receipt/Day (RHS)

Source: CAL Estimates, SLTDA and CBSL 29

LKR

140

12,000

Local tourism would be minimally impacted by a weaker LKR

Room rate increases in LKR terms have had minimal impact on domestic tourism
25 1,600

Correlation = -0.18
1,400 20 1,200 1,000 800 10

High inflation had a small impact on local tourism

15

600
400

5
200 0 1999 2001 2003 2005 2007 2009 0

CPI (LHS)

Local Tourist Nights (RHS) Source: CAL Estimates, SLTDA and CBSL 30

Thousands

IV. THE REST INCREMENTAL CONTRIBUTION TO EBIT

31

Cold Foods to continue to strengthen segment earnings, while retail is flat-ish

Cold food sales are the #1 driver of the CF&R segment Supermarkets are JKHs public face, though actual market share is modest Rising income levels higher spending on branded products which is JKHs target audience And Sri Lanka is still on a steep growth plane for supermarket spending increases

32

Cold Food Sales are the #1 driver of the CF&R segment

LKR Millions 1,600 1,436 1,400 1,217 1,200 1,249

Higher growth due to consumer foods sales

1,000

800 641 600 568 510 416 400

200 70 4 0 2008 -200 2009 -74 2010 2011 2012E 2013E 2014E 42

59

67

77

The Keells food products and Elephant House brand images and leadership positioning are strong, which should continue to drive EBIT in this segment

EBIT Consumer Foods

EBIT Retail Source: CAL Estimates and Company Reports 33

Supermarkets are JKHs public face, though actual market share is modest
Number of Stores

300

250

200

Government owned

150

100

The current low penetration is a two-edged sword: if JKH can expand profitably, then overall brand awareness will strengthen

Hypermarkets
50

Cargills

Sathosa

Keells Super

Arpico

Number of Stores in 2011 Source: CAL Estimates and Company Reports 34

Rising income levels higher spending on branded products which is JKHs target audience
Other Non-Durables Food and Drink Consumer Durables and Personal Care Transport and Communication Education Fuel and Light Housing and Clothing
100%
90%

Avg. Household Monthly Income = Rs. 36,400

Segment Spend = Rs. 20,200/ mo

80%

17%

70%

JKH caters to 90% of this segment

60%

50%

36%

40%

0%

20%

40%

60%

80%

100%

30%

6% LKR

Estimated Segment Spend Growth

50,000 40,000 30,000

20%

CAGR 19%

Source: CAL Estimates and Department of Census and Statistics

10%

20,000 10,000

0%

2011E 2012E 2013E 2014E

2010 Average Household Expense

35

And Sri Lanka is still on a steep growth plane for supermarket spending increases
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

LKR

Quality: brand loyalty develops as perceptions shift on deepening pockets

Choice: purchasing patterns shift to experimenting

Necessities based on price: unbranded and commodity-like purchasing patterns

Modern Retail Share of Household Expense

Source: CAL Estimates and AC Nielsen Data

Spend is expected to be based on quality and choice of products as consumers shift from traditional retailers to modern retailers
36

Property: intermittent inflows boost nonrecurring profits

Falling back on real estate management fees in FY13E (c.-40%) IFRS prevents early revenue recognition on sales: no large cash receipts for next 2-3 years However, JKHs large idle land bank is easily accessible for development CAL expects property revaluation gains to be slim over the next 2-3 years

37

Falling back on real estate management fees in FY13E (c.-40%)

JKH has no near-term projects planned or revenue from completed condos till FY14E Booking of
LKR Billions 3.5

3.0

2.5

residual condo sales during FY11-12 (based on % completion method)

Booking of residual condo sales from OnThree20

2.0

1.5

1.0

0.5

0.0 2010 2011 2012E 2013E 2014E

Increase of just 3% FY09FY10

Source: CAL Estimates and Company Reports 38

IFRS prevents early revenue recognition on sales: no large cash receipts for next 2-3 years
IFRS requires ownership to be transferred prior to revenue recognition. Lack of new developments means no large inflows for the next 2-3 years*

Majority of revenue recognized

60% of revenue recognized

Even if a project starts in 2012, profits can only be recognized in 2015

2011 2012 2013 Time to Completion 2014 2015

OnThree20 Emperor

* Based on 33 month project time-to-completion Source: CAL Estimates and Company Reports 39

However, JKHs large idle land bank is easily accessible for development
Although JKH has not indicated the development of new standalone condos in the near-term, the company holds prime developable land in the heart of Colombo
Acres 200 180 160 140 120 100 80 60 40 20 0 2008 2009 2010 2011

Colombo

Outside Colombo

Group Real Estate Portfolio (Freehold Land in Acres)

Source: CAL Estimates and Company Reports

40

CAL expects property revaluation gains to be slim over the next 2-3 years
LKR Millions 500 450 400 350 300 250 200 150 100 50 0 2007 2008 2009 2010 2011

Gains from revaluation of refurbished hotel properties

Due to booking of gains from refurbished hotel properties in 2011, it is unlikely the Group will see significant additional balance sheet uplifts

Revaluation Gains
Source: CAL Estimates and Company Reports 41

Finance: NTB sale a positive for shareholders

End FY10-11, JKH had paid an average price per share of Rs. 22.6 for a 29.9% stake in NTB New laws require JKH to divest at least 14.9% to own no more than 15% JKH to earn a 120% return assuming a Rs. 50/share exit price (vs. recent 55 60 trading range) This sizeable capital gain more than makes up for loss of attributable profits from the segment

42

JKH to earn a 120% return based on a Rs. 22.6 cost and sale at Rs. 50 (vs. recent 55 60 range)
Conservative assumption: Selling price of Rs. 50/share
60

Rs. 50
50

40

+120%

30

Rs. 22.6
20

+Rs. 1.7bn to PBT

10

Weighted Average Price

Sale Price
Source: CAL Estimates and Company Reports 43

This sizeable capital gain more than makes up for loss of attributable profits from the segment
LKR Billions 9 8

CAL sees Finance sector revenues down c.27% once stake falls to maximum allowed 15% by end 1Q12 (JKH FY11-12 End)

0 2010 2011 2012E 2013E 2014E

Note: Sell down is a regulatory requirement

Financial Services
Source: CAL Estimates and Company Reports 44

Others to contribute to EBIT at a steady pace

LKR Billions

10

Plantations, IT and Others are expected to be between Rs. Rs.88.6bn FY12-13E

0 2008 2009 2010 2011 2012E 2013E 2014E

-2
Other Revenue Other EBIT Source: CAL Estimates and Company Reports 45

V. APPENDIX 1 FINANCIAL STATEMENTS

46

Income Statement
March Year End (Rs.mn)
Revenue Transport Leisure Property CF&R Financial Services Other

FY2010
47,980 9,495 11,500 1,620 15,843 5,262 4,260

FY2011
60,500 13,426 13,810 2,494 18,358 6,484 5,929

FY2012E
73,953 16,994 16,304 2,984 21,925 7,741 8,004

FY2013E
77,464 17,334 19,258 1,812 24,792 5,623 8,645

FY2014E
85,861,012 19,178 20,692 2,518 28,376 6,020 9,077

Cost of Sales
Gross Profit Profit Before Tax Profit for the Group Profit to Equity Holders EPS (Basic) Recurrent Profit Recurrent EPS (Basic)

(36,914)
11,066 6,538 5,552 5,201 6.2 5,087 6.0

(46,857)
13,643 10,629 9,063 8,246 9.8 5,983 7.1

(58,423)
15,530 11,348 9,340 8,499 11.3 6,781 8.1

(61,196)
16,267 10,161 8,363 8,589 10.2 7,610 9.0

(67,830)
18,031 13,590 11,185 11,157 13.3 10,178 12.1

* EPS figures adjusted for subdivision of shares

47

Balance Sheet
March Year End (Rs.mn)
Assets Property Plant & Equipment Short-term Investments Other Assets 29,989 19,301 49 28,628 16,881 65 30,435 16,881 74 31,784 16,881 77 33,012 16,881 83

FY2010

FY2011

FY2012E

FY2013E

FY2014E

TOTAL ASSETS
Equity and Liabilities Stated Capital Reserves Minority Interest

98,658

110,292

121,336

125,715

133,302

23,322 26,510 6,430

24,612 34,975 7,608

24,612 46,365 8,449

24,612 56,276 9,201

24,612 69,981 10,208

Total Equity
Total Interest Bearing Debt Other Liabilities TOTAL LIABILITIES AND EQUITY

56,262
14,708 27,688 98,658

67,195
10,487 32,610 110,292

79,425
8,914 32,998 121,336

90,089
7,131 28,495 125,715

104,801
5,705 22,796 133,302

48

Cash Flow Statement

March Year End (Rs.mn)
Cash Flow from Operations Profit Before Working Capital Changes 3,339 5,602 10,832 10,582 14,178

FY2010

FY2011

FY2012E

FY2013E

FY2014E

Change in Working Capital

Cash Generated from Operations Other Changes Net Cash from Operations Cash Flow from Investing Purchase of PP&E Other Changes Net Cash from Investing Cash Flow from Financing Net Proceeds from Borrowings Other Changes Net Cash from Financing Cash and Cash Equivalents at End of Period

3,245
6,584 3 9,485

(56)
6 8,496 8,501

(417)
10.42 10,528 10,538

(1,688)
8.89 9,051 9,060

(492)
13.69 12,841 12,855

(1,782) (4) (5,823)

(4,978) 509 (4,469)

(3,909) (2) (5,531)

(4,076) (1,991) (6,067)

(4,101) (1,553) (5,654)

(1,688) 1,052 (636) 14,738

(5,371) (1,420) (6,791) 12,017

(1,573) (2,525) (4,098) 12,926

(1,783) (2,525) (4,308) 13,929

(1,426) (2,525) (3,951) 15,994 49

VI. PRESENT VALUE CALCULATIONS

50

Sum of the Parts: Transportation and Leisure

TRANSPORTATION Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC LEISURE Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC VALUE 75/25 12.0% 10.3% 2.0% 10.0% VALUE 40/60 20.0% 10.3% 2.0% 15.9%

Rs.mn EBIT Total FCF Terminal Value EV

2012E 3,806 3,897 49,978 53,875

2013E 3,940 3,737 47,922 50,880

2014E 4,292 3,688 47,296 49,466

Price/Share
Rs.mn EBIT Total

64
2012E 3,587

60
2013E 5,970

59
2014E 6,621

FCF
Terminal Value EV Price/Share

3,093
22,644 25,737 31

6,692
48,998 51,130 61

7,497
54,888 55,282 66
51

* Price/share is before net debt adjustment

Sum of the Parts: CF&R and Property

CF&R Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC PROPERTY Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC VALUE 30/70 17.8% 10.3% 2.0% 13.8% VALUE 50/50 17.8% 10.3% 2.0% 13.7%

Rs.mn EBIT Total FCF Terminal Value EV

2012E 1,275 1,187 10,227 11,414

2013E 1,316 1,563 13,469 14,392

2014E 1,513 2,092 18,028 18,086

Price/Share
Rs.mn EBIT Total

14
2012E 947

17
2013E 597

21
2014E 1,056

FCF
Terminal Value EV Price/Share
* Price/share is before net debt adjustment

991
8,673 9,664 11

557
4,291 5,773 7

1,101
7,456 9,790 12
52

Sum of the Parts: Financial Services and Others

FINANCIAL SERVICES Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC OTHERS Target Capital Structure (D/E) Cost of Equity Cost of Debt Growth Rate WACC VALUE 30/70 17.8% 10.3% 2.0% 14.5% VALUE 30/70 17.8% 10.3% 2.0% 14.9%

Rs.mn EBIT Total FCF Terminal Value EV

2012E 2,412 3,222 26,270 29,492

2013E 1,780 2,371 19,334 22,176

2014E 1,793 2,348 19,149 21,687

Price/Share
Rs.mn EBIT Total

35
2012E 2,129

26
2013E 2,895

26
2014E 2,953

FCF
Terminal Value EV Price/Share

2,516
19,947 22,463 27

3,506
27,796 29,767 35

3,585
28,427 29,831 35
53

* Price/share is before net debt adjustment

Sum of the Parts: Group Total

2012E 2013E 2014E

JKH Share Price

Transport Leisure CF&R Property Financial Services Others

181
64 31 14 11 35 27

207
60 61 17 7 26 35

219
59 66 21 12 26 35

-Net Debt/Share + Tax Shield Price/Share

2 1 180

2 1 206

(4) 1 224
54

Disclaimer
This document has been prepared and issued on the basis of publicly available information, internally developed data and other sources, believed to be reliable. Capital Alliance Securities (Private) Limited however does not warrant its completeness or accuracy. Opinions and estimates given constitute a judgment as of the date of the material and are subject to change without notice. This report is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The recipient of this report must make their own independent decision regarding any securities, investments or financial instruments mentioned herein. Securities or financial instruments mentioned may not be suitable to all investors. Capital Alliance Securities (Private) Limited its directors, officers, consultants, employees, outsourced research providers associates or business partner, will not be responsible, for any claims damages, compensation, suits, damages, loss, costs, charges, expenses, outgoing or payments including attorneys fees which recipients of the reports suffers or incurs directly or indirectly arising out actions taken as a result of this report. This report is for the use of the intended recipient only. Access, disclosure, copying, distribution or reliance on any of it by anyone else is prohibited and may be a criminal offence.

55

Contacts
Research Team Tel No: +94 11 2317777 (General) Email : teamresearch@capitalalliance.lk Head of Research Kishan Gunawardena Tel No : +94 11 2317784 Email : kishang@capitalalliance.lk Purasisi Jinadasa Tel No: +94 11 2317813 Email: purasisi@capitalalliance.lk Udeeshan Jonas Tel No: +94 11 2317746 Email: udeeshan@capitalalliance.lk Gayani Lewwanduwage Email: gayani@capitalalliance.lk

56